"It's going to blow up one day"

Marc Bauder's Master of the Universe runs like a sociological narrative of high finance as experienced by one man, former investment banker Rainer Voss. Film review.

Shot
mostly from an abandoned trading floor and consisting of mainly Voss speaking,
interspersed with occasional news footage, it lacks the scope of a film like Inside Job but it does give
a very human account of the crazy days of global finance - an era that refuses
to die.

Voss talks of the atmosphere at the banks
as like being in "the army": conformity is strongly instilled, asking
questions is frowned upon and 'politics' is an almost forbidden topic of
conversation. It brought to mind a
recent article by Geoffrey Heptonstall:

"There
is no virtue in questioning the way things are done. Individuals are such a
nuisance where the corporate will is the supreme governance."

HBOS' head of regulatory risk, Paul Moore, for
instance, was sacked in 2004 for what he describes as asking too many questions
and challenging the management over risky practices. In 2008 the bank ran into
severe difficulties and was eventually merged with Lloyds TSB, as well as
requiring a taxpayer bailout of around
£30bn.

Many of the bankers on astronomic salaries
would have been simple accountants if they had arrived 5 years earlier or
later, Voss argues, suggesting many of those 'masters of the universe' who feel
they are truly worth such colossal sums are simply in the right place at the
right time. On the products sold, the film cuts to footage from a Senate
hearing in the US where Goldman's executives faced a grilling for pushing
products to their customers that they described themselves as
"shitty". Voss explains that his bank couldn't sell the products they
created to BMW or Siemens, because big firms used similar economic modelling to
the banks themselves, but municipalities on the other hand did not - they were
sold to because they didn't have the knowledge and modelling that the banks
had.

"Are
the clients aware of what they're buying?"

Voss:
"No. That's the whole scandal. (I don't want that to be recorded)."

One of the cornerstones of free market
theory is that in perfect markets all participants enjoy 'perfect knowledge'
and that prices are indicative of that knowledge. Clearly the reality was very
different, and huge profits were made selling products to buyers on the basis
of their relative ignorance. Laissez-faire
regulation is rationalised on the basis that the two market counterparties--buyer
and seller--are best placed to judge the risks of the transaction and hence
government should 'get out the way'. Clearly, at least one of the parties here,
the buyer, was not well placed to judge the risks involved, and the other, the
seller, was ultimately protected from risk by the state in various ways (not
least multi-billion pound bailouts) and the mismatch between their short term
salaries and bonuses and the long term effects of their trades. Voss goes on to
describe the "lemming" mentality of bankers and their
buyers--municipalities in this instance--and says "it's only human",
and he's right, but the lemming is a far cry from the 'rational agent' of
orthodox doctrine. Products have become so complex, with so many consultants
and lawyers involved, that very few of those either buying or selling the
products really understand them, he argues.

On the social value of much financial
activity, Adair Turner's "socially
useless" description seems apt. Twenty years ago, Voss says, the
average holding time for shares was four years. Today it's 22 seconds. Banking
is increasingly detached from its traditional core role of supplying credit
whilst share purchasers have become increasingly detached from the notion of
'investment'; most trading is pure speculation.

The pressure on bank executives for ever
bigger profits is immense, their bosses attitude is "I don't care how you
do it", he says, a force which pushes those involved "in the
direction of illegality". The sort of environment in which this sort of
practice can continue must by nature be detached, to some degree, from everyday
society. This goes beyond just the hyper-conformity and militaristic
discipline, but includes a social world largely sealed off from reality: their
children go to the same schools, bank owned creches, and they mix in the same
social circle. He talks of a real "disconnection from social
processes", mirroring the increasingly large disconnect between the
financial economy and the real economy post-08. At a recent Civitas event in
London that I attended, a young Goldmans employee seemed completely baffled at
the notion that the UK economy was in anything other than great shape: it's not
just that finance is decoupled from the real economy, its that many of its
employees aren't even aware of such a disconnect.

On the global meltdown, Voss describes the
situation as banks "holding a gun to politicians heads", despite the
crisis really being "in the private sector", and talks of the
enormous profits made on Greek bonds. Asked 'where's next', he replies
"France", at which point it's "game over", "it's going
to blow up one day, either politically or financially". So far, the power
of the financial lobby has ensured the crises have been largely political, with
unrest across the globe as the price of keeping the financial world afloat and
million dollar bonuses flowing freely. Only Iceland took a different route,
that of financial detonation. For the rest of us, "there is no way this is
going to have a happy ending".

The film is nicely shot and maintains its
bleak, sterile feel throughout, but it remains personal snapshot and the viewer
is restricted to Voss' account, an account which sees deregulation as
blameless, banking as largely void of criminal conduct, and he is reluctant
throughout to address the questions of what really went wrong, if anything.

The strongest emotion that shines through is nostalgia: Voss misses that life,
that world. As a window into the life of a single investment banker and the
culture in which he thrived, the film is impressive, but it's a pity Voss was
not pressed on some of the bigger questions which could have provided a
slightly more contextualised vehicle for his highly watchable reminiscence.

Oliver Huitson is a former Co-Editor at openDemocracyUK and a freelance journalist. He contributed chapters to Jenny Manson's 2012 book, Public Service on the Brink, and NHS SOS (2013). He has written for The Guardian, The New Statesman, Vice and the BBC. He is on Twitter as @OllyHuitson

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